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How much memory is installed in your computer?
The camera uses quite a bit of your memory to operate properly and would
cause the poor video. Could be other
Issues, but worth checking.
Hope this helps. Bud

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Skype issues with your QuickCam Communicate STX
Detailed Description
This article explains what to do if you have problems using Skype with your QuickCam Communicate STX.Model Number: V-UBK45
Answer
If you are experiencing difficulties using the QuickCam Communicate STX with Skype, check the following:

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Go to Control Panel and Click on Sounds, Click
on Audio, then Click on the Microphone. Then Click on the drop
down and select Camera Microphone.
Click OK and it should work.
Hope this helps. Bud